Harman International (HAR) Earnings & Revenues Beat in Q4
Harman International Industries Inc. HAR reported better-than-expected fourth quarter fiscal 2016 results. Non-GAAP earnings of $1.57 per share beat the Zacks Consensus Estimate of $1.53. Earnings improved 14% on a year-over-year basis
Quarterly revenues of $1.881 billion were also ahead of the Zacks Consensus Estimate of $1.787 billion. On a year-over-year basis, revenues grew 12%.
On a non-GAAP basis, gross margin grew 110 basis points (bps) to 30.5%. Operating margin increased 140 bps to 8.2%. Non GAAP EBITDA margin was up 86 bps to 12%.
Segment Details
Connected Car segment revenues grew 11% year over year to $843 million, driven by higher take rates and stronger production. On a non-GAAP basis, gross margin at the segment improved 300 bps to 25.5% while operating margin grew 190 bps to 11.4%.
Lifestyle Audio revenues increased 25% year over year to $578 million led by higher take rates in car audio and the Bang & Olufsen acquisition. In addition, the company continued to see strength in demand for smart audio solutions. On a non-GAAP basis, gross margin at the segment improved 380 bps to 35.1% while operating margin increased 120 bps to 13.5%.
Professional Solutions division revenues inched up 1% from the year-ago quarter to $286 million. On a non-GAAP basis, gross margin at the segment fell 340 bps to 36.7%. Non-GAAP operating margin came down to 9.8% from 13.3% in the prior year quarter.
Revenues at the company’s Connected Services division were $185 million, up 7% year over year. On a non-GAAP basis, gross margin at the segment declined 850 bps to 28.2% while operating margin was down 650 bps to 10.3%
Balance Sheet
As of Jun 30, 2016, cash and cash equivalents were $602.3 million compared with $649.5 million as on Jun 30, 2015.
Outlook
The company provided its guidance for fiscal 2017.
Harman expects sales for fiscal 2017 in the range of $7,300 million - $7,500 million. Full year GAAP earnings per share are projected to be $6.75 to $7.00.
Our Take
Harman is one of the leading companies in the car infotainment space. Apart from audio equipment, Harman’s cloud platform and scalable technology are gaining popularity with a rise in the number of connected cars. In the past, the company has partnered with the likes of InterDigital IDCC to develop a range of cutting-edge IoT services.
In the fourth quarter, the company extended its partnership with Alphabet’s GOOGL Google to provide audio modules for the latter’s upcoming modular smartphone, Ara. Apart from Ara, Harman and Google are also collaborating for another project – Soli – of the Google’s Advanced Technology and Projects Group (ATAP). Harman is working with ATAP for developing speakers that come with a built in Soli radar.
However, a concern for the company is the exposure to significant customer concentration risks with its top five customers accounting for approximately half of its revenues and around 75% of its auto-related revenues.
Currently, Harman carries a Zacks Rank #4 (Sell). A better-ranked stock in the broader tech space is Quantum Corporation QTM, sporting a Zacks Rank #1 (Strong Buy).
HARMAN INTL IND Price, Consensus and EPS Surprise
HARMAN INTL IND Price, Consensus and EPS Surprise | HARMAN INTL IND Quote
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